Junior Capital Pool (JCP)

What Is a Junior Capital Pool (JCP)?

A junior capital pool (JCP) is a corporate capital structure that permits beginning phase startups to sell shares in the company before really laying out a line of business. This form of company financing is a Canadian development and is permitted exclusively in Canada.

The JCP may likewise be known as a capital pool company (CPC).

The JPC is, basically, a shell corporation without any assets other than cash, which has not yet started business operations. Their issues may be portrayed as stock options instead of stock shares, since their value still needs not set in stone sometime not too far off.

Grasping a Junior Capital Pool (JCP)

This original form of start-up financing was imagined in Alberta, Canada, in the late 1980s, generally to address the necessities of startups in the area's prospering oil and gas industry.

Over the long haul, it has transformed into an all the more widely utilized corporate structure known as the capital pool company (CPC). The capital pool company has turned into an alternative way for recently made private companies to fund-raise and open up to the world.

The system was made by and is regulated by the Canada-based TMX Group. Companies with this structure additionally trade on the TSX Exchange.

A capital pool company is a company with experienced directors and some capital, yet without current commercial operations at the hour of the initial public offering (IPO). The directors of the CPC frequently center around securing an emerging company. After the completion of the acquisition, that emerging company approaches the capital and the listing prepared by the CPC.

The purpose of such a capital structure was to give a simple approach to beginning phase companies to raise capital. With a base investment from founders of $100,000, the junior capital pool company could get a listing and exposure to public markets, furnishing them with the extra money expected to send off.

Since its beginning, the capital pool program has listed around 2,600 capital pool companies, which have raised some $75 billion Canadian.

Illustration of a Junior Capital Pool (JCP)

Let's assume you are establishing a company that has acquired a newfound reserve of oil and plans to investigate and extricate oil from it. Your company has not yet brought a single barrel of oil to the market or even began drilling.

You structure the company as a JPC, so you and your kindred founders put up your very own portion money into the venture. You then list the company as a publicly-traded entity on the Canadian exchange.

Note that this venture is still in the planning phases. Since there is no proven revenue stream yet, capital pool companies are typically viewed as extremely unsafe investments.

Features

• The JCP is permitted exclusively in Canada and trades just on the Toronto Stock Exchange.
• This type of corporate structure was a response to a 1980s boom in the oil and gas exploration industry.
• A junior capital pool, or JCP, is another corporate entity that is permitted to fund-raise by giving shares before it starts operations.